Ethanol not the answer to fuel shortage<\/p>\n
C. G. Moghe, Jakarta<\/p>\n
In his article dated July 12, 2005, Harold Koh posed a
\nquestion Is Ethanol the answer to fuel shortage? and had a lot of
\nthings to say proposing that it is.<\/p>\n
His fears are in fact valid. Indonesia, now a net importer of
\noil, lacks the financial resources to foot the potential import
\nbill of continuing imports estimated by Koh to be more than
\nUS$1.1 billion in 2005 (assuming a price of $50 a barrel). As a
\nsolution Koh visualizes the use of ethanol as a supplementary
\nfuel for motor vehicles, without really getting in to the depth
\nof the issues involved and the current situation of the sugar
\nindustry (which is supposed to provide enough molasses from which
\nthe ethanol is to be produced).<\/p>\n
In simple terms, after the sugar cane juice is processed to
\nget sugar, the residual molasses is distilled to get the Ethanol.
\nTherefore a strong and efficient sugar industry is necessary for
\ngetting adequate Ethanol at economic prices. While ethanol has
\nindeed been used successfully as an alternative fuel in Brazil
\n(as well as other countries), with the automobiles using fuel
\ncontaining at least 24 percent ethanol according to Koh, the
\nsituation is vastly different in Indonesia. Koh thus quite
\ncorrectly says that "Brazil's success in ethanol use is due
\nprimarily to its strong sugar industry".<\/p>\n
Brazil is a net exporter of sugar in the world market but
\nIndonesia does not manufacture enough sugar to meet its internal
\nneeds. In fact the Indonesian sugar industry can not meet the
\nworld competition and world sugar prices have always been lower
\nthan those in Indonesia.<\/p>\n
Indonesian sugarcane yields have not kept pace with the world
\nyields and the sugar cane farmers of Indonesia are unable to sell
\ntheir sugar, except with the protection offered by the Government
\nin various forms. There is no likelihood therefore of any
\nsignificant change in this situation in near future, leading to
\nadequate supply of ethanol from domestic sources.<\/p>\n
On the other hand, import of ethanol for blending with
\npetrol\/gasoline may be somewhat more economical than import of
\npetrol\/gasoline, it will still leave the country to foot the
\nimport bill, which it is ill equipped to manage. If the local
\nmeager supply of molasses is diverted for making ethanol for
\nblending, then it will create a shortfall in the industries which
\nuse the molasses today, generating an adverse chain reaction in
\nsome other areas, while trying to solve the problems related to
\nimport of petrol\/gasoline.<\/p>\n
Koh has rightly observed that "The production of feedstock for
\nethanol will require large and sustainable supplies of sugar
\ncane. Indonesia is perfectly placed to achieve this, thanks to
\nthe large tracts of fertile agricultural land, a year long
\ngrowing climate, and abundant labor force in the rural areas".<\/p>\n
He has however ignored that despite these "ideal conditions",
\nIndonesia has been importing huge quantities of Sugar, indicating
\nthat something somewhere in Indonesia is not in the "Ideal form"
\nand Ethanol as an alternative fuel is commercially not workable.<\/p>\n
What Indonesia needs to concentrate on is Compressed Natural
\nGas (CNG) and Bio-Fuel obtained from processed oils such as Palm
\nOil.<\/p>\n
For both the natural gas and palm oil industries, Indonesia is
\na world class player.<\/p>\n
The abundant natural gas available in Indonesia (which can be
\nfurther supplemented by reserves yet to be tapped), exported in
\nthe form of liquefied natural gas (LNG) can be easily further
\ndeveloped, together with the infrastructure for transportation
\nand distribution of CNG. Use of CNG will also be more eco-
\nfriendly.<\/p>\n
All the necessary natural gas would be available locally,
\nwithout any need to import. The use of CNG is also well developed
\nthe world over with several manufacturers in a position to make
\nvehicles, especially trucks and buses using CNG, where the usage
\nis heavy and the changeover will make a major positive
\nimprovement in the national budget.<\/p>\n
Indonesia is the largest producer of palm oil in the whole
\nworld, with vast potential to develop the industry further. The
\nprocessing of palm oil into bio-fuel will mean very high value
\naddition, which will further encourage growth in production of
\npalm oil, keeping the fuel prices down, as compared to imported
\npetrol\/gasoline.<\/p>\n
So the future would be CNG and Bio-Fuels, not Ethanol, as far
\nas Indonesia is concerned.<\/p>\n
The writer has been working more than 33 years in banking,
\nfinancial services and projects. He can be reached at
\ncmoghe@indosat.net.id<\/p>",
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